Technical claims brief

Monthly update – August 2010

Contents

Monthly update August 2010

News 1
Court of Appeal to rule on scope of
pure economic loss 1

Limiting recoverable defence costs in

criminal cases ruled unlawful 1

Ministry of Justice to investigate claims

management companies’ use of text
and e-mail 2

Costs 3
Costs penalties for lack of meaningful
negotiation: Alrahi v Ellis –
Runcorn County Court (2009) 3

Part 36 Rules clarified: Gibbon v

Manchester City Council; L.G. Blower
Specialist Bricklayer Ltd v Reeves
– Court of Appeal (2010) 4

Fraud 6
Amending a defence to allege fraud:
Hussain and Another v Sarkar and
Another – Court of Appeal (2010) 6

Liability 7
Highway Authority liable for creating
pedestrian hazard: Yetkin v London
Borough of Newham – Court of Appeal
(2010) 7

Quantum 8
Periodical payments, allowance for State
Funding: MS (A Protected Party ....)
v X and Y – High Court (2010) 8
News
Court of Appeal to rule on
scope of pure economic loss
The Court of Appeal is due to rule later this
month on whether losses suffered by the
users or owners of a defective product or
building should still be considered as pure
economic loss (not recoverable in tort)
rather than physical damage.

In the case of Linklater Business Services

v Sir Robert McAlpine and Others, ten
years after a major refurbishment of the
claimant’s offices metal pipe work which
was supposed to have been sealed to
protect it from water vapour was found
to have corroded. Linklater brought
proceedings against the main contractors
Sir Robert McAlpine who then brought in
their sub-contractors How Engineering
who in turn brought in their sub-contractors
Southern Insulation who had actually fitted
the insulation.
Southern applied to have the claim against
them struck out on the basis that Linklaters
loss was purely economic and could not
succeed. The application was heard in the
Technology and Construction Court by Mr
Justice Akenhead who refused it on the
grounds that the case raised important
points of law which could be decided either
way and because he was not convinced
that corrosion was “damage” for litigation
purposes. The Court of Appeal will now rule
on these issues.
Comment: Guidance from the Court
of Appeal will hopefully bring clarity to
a sometimes complex area of law but
their decision may not be welcomed by
defendants or their insurers if claimants are
enabled to pursue claims for losses which
were previously unrecoverable.
Limiting recoverable defence himself from what might in some cases
costs in criminal cases ruled be wholly false accusations. It was most
unlawful unlikely that it had been the intention of
Parliament when the 1985 Act was passed
In 2009 the Lord Chancellor implemented to allow the Lord Chancellor to make such a
new regulations limiting the amount of costs change without Parliamentary scrutiny.
that a successful defendant in a criminal
case could recover from central funds. Comment: Pending the introduction of a
Recoverable costs were limited to legal aid new scheme (subjected to Parliamentary
rates leading to significant shortfalls in the scrutiny) defendant’s costs will presumably
costs recovered. be assessed under the old 1986 regulations.
The removal of the 2009 regulations should
The law society sought a judicial review assist insurers who have funded successful
of the new regulations which they argued criminal defences for policyholders and who
breached the principle set out in the are seeking to recover their outlay.
Prosecution of Offenders Act 1985 section
16 (6) that a sum of money should be
provided which was reasonably sufficient to
compensate a successful defendant.
The Administrative Court has now ruled
that the new regulations are unlawful.
The regulations made a constitutionally
important change by doing away with the
idea that a defendant ought not to have to
bear the (reasonable) costs of defending

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Technical claims brief, monthly update – August 2010
Ministry of Justice
to investigate claims
management companies’ use
of text and e-mail
Post Magazine has reported that the
Ministry of Justice is understood to be
investigating the growing use of unsolicited
text messages and e-mails by claims
management companies offering their
services to recover damages for personal
injuries. A Royal Bank of Scotland insurance
division study is reported as finding that
around 15% of claims arose after claimants
were contacted in this way. Contacting
personal mobile telephone accounts whose
holders have not opted to use the services
of an accident management company (or
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Technical claims brief, monthly update – August 2010
at least made enquiries or purchased a
product from them in the past) is regarded
as a breach of regulation and is arguably
in contravention of the Compensation Act
2006.
Comment: Lord Young is to lead an
investigation into the UK’s “compensation
culture” and has promised to clamp down
on the advertising of claims recovery
services. The appropriateness of his
selection has been questioned however due
to his major shareholding in the credit hire
company Accident Exchange, an illustration
perhaps of how widespread the claims
management industry has become and how
difficult it may be to reduce its influence.
Costs
Costs penalties for lack of
meaningful negotiation: Alrahi
v Ellis – Runcorn County Court
(2009)
The claimant suffered moderate whiplash
type injuries after her car was struck
in the rear by the defendant’s car. The
defendant’s insurers conceded liability
and made a pre-issue Part 36 offer. The
claimant countered with two Part 36 offers
but these were rejected and the case went
to a hearing.

At trial the claimant was awarded £6,050

failing to beat the defendant’s Part 36 offer
of £6,750. The defendant argued that
the claimant should not even be awarded
predictive costs on the grounds that their
two Part 36 offers of £7,880 and £7,500
were both unrealistic and did not amount to
“negotiation” as required by the pre-action
protocol. They had also failed to disclose
any evidence in support of some items of
special damages claimed.

The judge agreed and penalised the

claimant’s behaviour by awarding only
two thirds of predictive costs (with
disbursements in full) to them and 8 per
cent interest on the defendant’s costs.

Comment: This case is an encouraging

example of the court applying sanctions
against a claimant who would not enter into
meaningful negotiations to settle their claim
short of a hearing.

Our thanks go to Berrymans Lace Mawer

who represented the defendant for giving us
details of this case. Leech and Co acted for
the claimant.

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Technical claims brief, monthly update – August 2010
Part 36 Rules clarified:
Gibbon v Manchester City
Council; L.G. Blower Specialist
Bricklayer Ltd v Reeves –
Court of Appeal (2010)
In these joined appeals the Court of Appeal
considered a number of issues around
the interpretation of Part 36 of the Civil
Procedure Rules (CPR) and issued useful
guidance on the application of the rules.
In Gibbon the claimant had injured herself
when she fell in the defendant’s school
playground. The defendant admitted liability
and made a Part 36 offer. The claimant
rejected the offer and made a counter offer
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Technical claims brief, monthly update – August 2010
on a Part 36 basis of £2,500. The defendant
did not initially accept the £2,500 offer but
made an offer slightly improved on their
original one. The claimant refused this
offer and the defendant eventually decided
to offer the claimant the £2,500 that she
had sought, again on a Part 36 basis. The
claimant by this time however had decided
that she would not accept £2,500 and
rejected the defendant’s offer for this sum.
The defendant tried to formally accept the
claimant’s £2,500 offer in writing whereupon
the claimant’s solicitor advised them that it
had been withdrawn. The defendant cited
CPR 36.9 (2) i.e. that a Part 36 offer may
be accepted at any time unless a notice
of withdrawal has been served and sent
a settlement cheque for £2,500 which
the claimant returned prior to issuing
proceedings.
At first instance the judge held that the
defendant was entitled to accept the
claimant’s offer which had not been
withdrawn and awarded their costs from
the date of the offer. The claimant appealed
arguing that the offer was no longer
capable of acceptance under the common
law principle that a rejected offer cannot
subsequently be accepted.
The Court of Appeal held that Part 36.9(2)
was clear and that the court should only
resort to common law principles in situations
where there was some ambiguity. The
rules clearly stated the manner in which an
offer should be withdrawn and this had not
been done, there was no room in the rules
for the concept of implied withdrawal. The
acceptance of the offer was valid and the
costs order appropriate.
“In a case where the offer has been
beaten by a very small amount
and there is clear evidence that the
successful party has suffered serious
adverse consequences as a result
of pursuing the case to judgement
those (non financial) factors may be
sufficient to outweigh success in
pure financial terms but in my view
such cases are likely to be rare.”
Lord Justice Moore-Bick
The Court of Appeal held that the award
was materially more advantageous and
upheld the trial’s judge’s order on costs
as being within his reasonable discretion.
Whilst accepting that Carver was binding
the Court of Appeal endorsed Lord
Jackson’s criticisms of it in his review of civil
litigation for bringing uncertainty into the
operation of Part 36. They commented that
cases where claimants beat Part 36 offers
by a small amount but were ruled to be
materially less advantageous should be rare.
Comment: In both these cases the Court
of Appeal confirmed that common law
principles do not apply to Part 36 offers
and that more than one offer may be open
for acceptance at any given time. Parties
to litigation should be careful to formally
withdraw offers if they do not wish to leave
these open for acceptance. Litigants should
also bear in mind that in judging the success
of the parties the courts will focus on the
size of the award relative to the Part 36
offers in the majority of cases.

In Blower the claimant was a builder who

sued his customers for the cost of home
improvements which they had refused to
pay for. The defendants made three Part 36
offers at different times but later withdrew
all but the first. At trial the claimant beat the
defendants’ Part 36 offer although not by
a large amount. The judge at first instance
ordered the defendants to pay half the
claimant’s costs from the date that the later
two Part 36 offers were withdrawn. The
defendants appealed arguing in line with the
Court of Appeal decision in Carver v BAA
that although the settlement awarded was a
larger one than their Part 36 offer it was not
all things considered (stress, unrecoverable
costs etc) materially more advantageous.
The judge’s costs order was therefore too
generous to the claimant.

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Technical claims brief, monthly update – August 2010
Fraud
Amending a defence to allege
fraud: Hussain and Another v
Sarkar and Another – Court of
Appeal (2010)
The two claimants alleged that they had
been injured when the car in which they
were passengers was struck in the rear by
a van. The insurers of the van suspected
that the accident was contrived but had
insufficient evidence to plead fraud. They
applied to the court for extra time to
investigate but were refused.

A week before trial the insurers (the second

defendants) having received additional
information believed that they had enough
circumstantial evidence to specifically plead
fraud and applied to the court to amend the
defence. The recorder again refused their fraud was not permitted. They should
application, found for the claimants at the not be penalised for the lateness of the
hearing and awarded damages for injury. application because they had not had
sufficient evidence to make it earlier and had
The insurers successfully appealed to explained their position to the court.
the Court of Appeal who set aside the
judgments and ordered a retrial. The Comment: Evidence of fraud often only
insurers had information that the driver of emerges close to trial and although each
the van worked for a company with which case must be decided on its facts, this
the three occupants of the car were all judgment should be helpful to insurers.
connected. The accident had also occurred The Court of Appeal has confirmed that a
in a place where it was unusual for the defendant should be allowed to make a late
claimants and defendants to be. Together application to amend provided that it is in
with the inconsistent financial information the interests of justice and they can give a
supplied by the claimants and their satisfactory explanation for the delay.
concealment of their relationship with the
van driver the circumstantial facts amounted
to a reasonable cause for believing that
the accident was staged. The recorder
had been wrong in his assessment that
the defendant’s application was essentially
no more than a “fishing expedition”. The
fundamental objective of the Civil Procedure
Rules was to do justice and the recorder
should have concluded that there was a
substantial risk that the insurers would
suffer injustice if their application to plead

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Technical claims brief, monthly update – August 2010
Liability
Highway Authority liable for
creating pedestrian hazard:
Yetkin v London Borough of
Newham – Court of Appeal
(2010)
The claimant was run over by a car whilst
attempting to cross the second half of a
six lane dual carriageway from the central
reservation. She was using a traffic light
controlled pedestrian crossing and her
primary allegation was that the lights were
green in her favour and red against the
motorist’s car. Her alternative submission
was that the local authority had created
a hazard by planting shrubs on the
central reservation which had grown to a
considerable height and blocked her view
to the left.
At first instance the judge rejected the
claimant’s allegations against the motorist
finding that he had been proceeding
properly through a green light. The judge
went on to find that the shrubs did indeed
interfere with the claimant’s view of the road
and had significantly contributed to the
accident but having considered the House
of Lords ruling in Gorringe v Calderdale
MBC he ruled that there were additional
requirements on a claimant bringing a
common law claims against a highway
authority and the authority did not therefore
owe the claimant a duty of care. The judge
said that had the local authority been liable
he would have found 75% contributory
negligence on the part of the claimant.
The claimant appealed arguing that the
judge had taken passages from Gorringe
out of context and had misunderstood
them. She also argued that the finding of
75% contributory negligence should be
reduced to 50%.
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Technical claims brief, monthly update – August 2010
“...I entirely accept that the judge
took these passages from Gorringe
out of context and consequently
misunderstood them. He thought
that they imposed additional
requirements on a claimant bringing
a conventional common law claim
against a highway authority for
creating a hazard on the highway.
There are no such additional
requirements.”
Lady Justice Smith
The Court of Appeal agreed that the judge
had misunderstood Gorringe which was
not concerned with local authority acts so
much as omissions. There was nothing
said in Gorringe which undermined the
well-established position that a person
who affected the safety of the highway
would generally owe a duty of care to road
users. Lord Brown’s comments in Gorringe
about highway authorities “enticing” a
motorist into an accident were merely an
example of colourful language; there was
no requirement for a created danger to
amount to enticement. The local authority
did owe the claimant a duty of care. The
75% contributory negligence finding was
appropriate as a pedestrian who chose
to cross a three lane highway without
waiting for the lights to change in her favour
accepted a high degree of responsibility to
ensure that it was safe to do so.
Comment: Local authorities who plant
shrubs near crossings should be careful
that they do not obstruct pedestrians’
views of the highway as on the basis of this
judgment they are likely to be found partially
liable if this contributes to a subsequent
accident.
Quantum
Periodical payments,
allowance for State Funding:
MS (A Protected Party ....) v X
and Y – High Court (2010)
The claimant in this case suffered
catastrophic injuries in a road traffic accident
and was a protected party no longer having
mental capacity to manage the litigation.

He was awarded a lump sum of £350,343

(including general damages of £200,000)
plus Periodical Payments of £92,720 per
annum indexed to the 75th percentile of
the Annual Survey of Hours and Earnings
index number 6115. The claimant’s care
and accommodation were at the time of
the hearing being entirely met by the state.
The Consent Order approved by Master
Fontaine recognised this and stated that the
claimant would not receive any money by
way of Periodical Payments unless and until
he was required to pay for any part of his
care and /or accommodation himself.

Comment: Following the Court of Appeal

ruling in Peters v East Midlands S.H.A. (see
April 2009 brief) that claimants were not
obliged to apply to the state to fund care
and accommodation needs, defendants
found it increasingly difficult to obtain
any discount on lump sum settlements
in respect of state funding. Insurers have
however enjoyed more success with
settlements involving periodical payments
where claimants have proved more willing if
not to offset state funding in advance then
to at least agree to refund the amount of
any state payments received to insurers.
If state funding for the claimant continues
the insurers in this case will achieve a huge
saving.

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Technical claims brief, monthly update – August 2010
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Technical claims brief, monthly update – August 2010
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